The General Meeting of Shareholders (GMS) is the highest decision-making body in a joint-stock company, with resolutions playing a crucial role in shaping corporate governance and management. However, not all resolutions meet legal and practical requirements, posing a risk of annulment. This article provides a detailed legal guide on handling violations in the GMS in 2025.

1. Role of GMS Resolutions

A GMS resolution records key decisions of the General Meeting of Shareholders in a joint-stock company, adopted per legal procedures and the company’s charter.

This resolution is crucial for strategy, management, and operations, ensuring decisions align with voting shareholders’ consensus. Compliance with GMS resolutions helps companies operate transparently, efficiently, and in alignment with the common interests of all shareholders.

GMS resolutions directly affect corporate strategies and operations. Therefore, ensuring legality and transparency in the approval process is essential.

2. Common Violations

2.1 Common Violations in Organizing the GMS May Include:

Failure to Hold the GMS on Time:

According to regulations, the annual GMS must be held within four months from the end of the financial year. If a company fails to hold the meeting within this period, it may be fined between VND 5 – 10 million (Point a, Clause 1, Article 34 of Decree 50/2016).

Failure to Meet the Required Attendance Rate:

To be valid, the GMS must be attended by shareholders representing at least 51% of the total voting shares. Failure to meet the required attendance rate is a common issue, preventing the meeting from proceeding and requiring rescheduling, leading to wasted time and costs.

Violations in Convening and Notification Procedures:

Improper convening and notification procedures, such as failing to send notices on time or omitting necessary information and documents, may invalidate GMS resolutions.

Violation of Shareholders’ Nomination and Candidacy Rights:

Restricting shareholders’ rights to nominate and run for positions by imposing conditions that do not comply with legal regulations may lead to the annulment of GMS resolutions.

2.2 Mechanisms for Handling Violations:

• Annulment of GMS Resolutions: Resolutions that do not comply with legal regulations or the company’s charter may be annulled (Clause 2, Article 148 of the Enterprise Law).
• GMS Complaints: Shareholders may file complaints regarding the organization process, voting rights, or non-transparent decisions. This ensures that shareholder rights are protected and enhances transparency in corporate operations.
• Dispute Resolution: Disputes related to shareholder rights or GMS decisions must be resolved according to legal regulations through courts or arbitration to ensure the lawful rights of the parties involved.

3. Process for Annulment of GMS Resolutions

To annul a GMS resolution, the following steps must be taken:

1. Determine the Right to Request Annulment of the Resolution:

Clause 2, Article 148 of the Enterprise Law states that shareholders or groups of shareholders holding at least 5% of total ordinary shares, or a lower percentage as stipulated in the company’s charter, have the right to request a court or arbitration to review and annul the GMS resolution if (Article 151 of the Enterprise Law):

• The procedures for convening the GMS and making decisions seriously violate the Enterprise Law or the company’s charter.
• The content of the resolution violates the law or the company’s charter.

2. Prepare the Annulment Request Dossier:

The dossier includes:

• A request for review and annulment of the resolution.
• A copy of the GMS resolution or meeting minutes, or vote counting results.
• Evidence proving the conditions for annulling the GMS resolution (evidence of violations in the organization process or resolution content).
• Personal documents of the shareholder or group of shareholders.

3. Submit the Annulment Request:

• Shareholders or groups of shareholders submit the annulment request to the competent court or arbitration.
• If submitting to arbitration, parties must have a prior or post-dispute arbitration agreement.

4. Statute of Limitations for Annulment Requests:

The request to annul a GMS resolution must be made within 90 days from the date of receiving the GMS meeting minutes or vote-counting results (Article 151 of the Enterprise Law).

5. Resolution Process:

• Participate in hearings and comply with court decisions.
• The court or arbitration will review the annulment request. If the request is deemed valid, the competent authority will issue a decision to annul the resolution or part of its content.

4. Legal Consequences

The annulment of a resolution may lead to the following consequences:

• Loss of Resolution Validity: When a GMS resolution is annulled by a court or arbitration, it loses legal effect from the time of annulment. This means that decisions and actions based on the annulled resolution will no longer have legal value.
• Restoration of the Original Legal Status: The company must take necessary measures to restore the legal status as it was before the annulled resolution was passed. This may include canceling or adjusting contracts, transactions, or decisions made based on the annulled resolution.
• Reorganizing the GMS: The company may need to convene and reorganize the GMS to discuss and adopt substitute resolutions to ensure business continuity.
• Legal Liability and Compensation for Damages: If the annulled resolution causes damage to shareholders or third parties, the company or related individuals may be held liable for compensation in accordance with legal regulations.
• Impact on the Company’s Reputation and Operations: The annulment of a GMS resolution may negatively affect the company’s reputation and image, causing loss of trust from shareholders, partners, and customers, as well as potentially impacting the stock market value.

5. Preventive Measures

To avoid violations in the GMS, businesses should:

1. Ensure Proper Convening and Organization of the Meeting

• Authority to Convene: (Article 145 of the Enterprise Law)
  • The Board of Directors (BOD) is responsible for convening the annual and extraordinary GMS as prescribed in Article 140 of the Enterprise Law 2020.
  • If the BOD fails to convene, the Supervisory Board or shareholders/a group of shareholders holding at least 5% of the total ordinary shares for at least six consecutive months have the right to request a meeting.
  • If the BOD does not convene within 30 days from the request date, the Supervisory Board will take over the responsibility and convene the GMS within the next 30 days.
• Meeting Invitation Notification: The convener must send invitations to all shareholders eligible to attend at least 21 days before the meeting unless the company charter specifies a longer period. The notice must clearly state the time, location, and proposed agenda. (Article 143 of the Enterprise Law)
• Shareholder Registration for Attendance: Before the meeting starts, shareholder registration must be conducted. Individuals or organizations authorized to attend must present a written authorization document upon registration. (Article 141, Clause 1, Article 146 of the Enterprise Law)

For more details on GMS meeting procedures, please refer to the article: Annual Shareholder Meeting Requirements in Vietnam: Legal Guide 2025 

2. Ensure Transparency in Information and Document Storage

• Document Retention: Businesses must retain important documents such as the company charter, shareholder registry, industrial property rights certificates, product quality registration certificates, licenses, and other certifications. These records must be kept at the company’s headquarters or another location specified in the company charter. (Article 11 of the Enterprise Law)
• Accounting Document Preservation: Accounting units must ensure adequate facilities and management systems to preserve accounting documents. Accountants are responsible for safeguarding accounting records during their use. (Article 9 of Decree 174/2016/ND-CP)

3. Strict Compliance with Legal Regulations and the Company Charter

• Timeframe for Holding the Annual GMS: The annual GMS must be held within four months from the end of the financial year. In necessary cases, an extension may be granted but cannot exceed six months from the financial year’s end. (Clause 2, Article 139 of the Enterprise Law)
• Conditions for Holding the GMS: The GMS is valid when shareholders attending represent more than 50% of the total voting shares (specific percentages may be stipulated in the company charter). (Article 145 of the Enterprise Law 2020)
• Validity of GMS Resolutions: A GMS resolution adopted with 100% of total voting shares is legally valid and effective, even if the meeting convening and resolution adoption process violates the Enterprise Law or the company charter. (Clause 2, Article 152 of the Enterprise Law)

Conclusion

Handling violations in the GMS not only helps businesses protect stakeholders’ rights but also ensures sustainable development. By complying with legal procedures and implementing preventive measures, businesses can minimize risks and enhance their reputation in the market.

For detailed advice on business bankruptcy procedures, please contact Harley Miller Law Firm.

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